Australian advisers lack ability to invest abroad: expert

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The visiting founder of an Asian asset management firm has spoken of the promising opportunities that lie in the Chinese growth market, which in the next decade is projected to be the world’s largest.

But Ronnie Wu told Wealth Professional that the vehicles that Australian’s can use to invest abroad are still quite “limited”.

The founder and CIO of Penjing Asset Management said that China is 40% cheaper than many of the Asian emerging markets making the risk/reward very attractive.

He said he doesn’t believe that recent problems in the world’s largest trading nation are systemic in risk, and that the GDP is only on the up.

“In the past 10 years infrastructure has driven GDP growth, but going forward it will be driven by private consumption,” he said. “Focusing on private consumption in China is a good idea.”

To allow interested investors to diversify their portfolios by adding interests abroad, Wu’s company are in the process of developing a listed vehicle in Australia, with the proceeds going to investing in these overseas markets.

He said although the Australian market is adapting and trying to find more efficient ways to invest overseas, it is still restricted in choice.

Wu knows of several listed vehicles in Australia, but said that the majority are only for local investment.

Prime Minister Tony Abbott’s current Asia trade mission to sign free trade deals with China, Japan and South Korea will hopefully help further cement ties between the two continents, he said.

“Geographically Australia is part of Asia and there are a lot of ways they can be beneficial for each other. Part of this has to do with the US dollar – the Chinese are concerned about trading everything in US money, so they are eager to diversify away from that. I also think within Asia, Australia has a very important role on the commodity front.”

Any investor with the bulk of their portfolio in only Australian assets trading at high multiples is taking a risk, and should diversify abroad, Wu said.

“It would be an easy call to look at the USA, but in terms of risk and reward Asia is certainly worth a closer look,” he said.

The Financial Services Council is also delighted about Abbott's trade mission, and said the free trade agreements would be good for Australia and the economy.

“Initiatives like the Japan Free Trade Agreement and the Murray Review will help deliver outcomes that facilitate Australian financial services exports to Asia and an export-oriented and globally competitive Australian financial services industry,” said CEO John Brogden.

Last month an article appeared in Wealth Professional after the launch of a major academic research report into the internationalisation of the renminbi (RMB).

The report confirmed Wu’s perspective and heavily criticised Australia’s policy issues surrounding an investment manager regime (IMR).

“It’s critical that Australia gets an effective IMR in place. The sooner the better,” said one of the authors, Geoff Weir.

He said that based on “conservative” assumptions, in the next 10 years the Chinese equity market is likely to grow to the biggest in the world.

Australian advisers need to pay attention to this now and look to bank in on opportunities spurred by the market growth, said Weir.


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